On Monday, Apple has lowered the prices for a number of products in China, including iPhones. Earlier this year, local media outlets have reported that major Chinese online retailers, JD.com, Sunning, and Tmall, cut iPhone prices. The move comes on the heels of disappointing first quarter, when iPhone sales plummeted 15%. Apple’s total net sales in Q1 decreased from $88.29 billion to $84.31 billion with Greater China region posting particularly negative results.

Several factors contributed to Apple’s negative performance in China. Economic slowdown in the country and Apple overpricing its products are the obvious ones. In addition, social backlash in China following the arrest of Meng Wanzhou, Huawei CFO, seems to be at least in part directed at Apple. While it is hard to gauge the effect public sentiment had on Apple’s sales, the Annual Report Huawei released on March 29 and titled Bullish Growth in the Face of Adversity suggests that the company took some of the Apple’s market share in China. In contrast to Apple, Huawei reported 19.5% increase in sales revenue and 25.1% increase in net income year-over-year.

Two developments suggest that the situation may improve for Apple. First of all, in an attempt to stimulate sluggish growth, Chinese government decided to decrease value-added tax rate. Manufacturing sector stands to benefit the most with 3% cut. Following the announcement, a string of foreign companies introduced a 3% price cut to their products.

Secondly, on April 01, IHS Markit published Caixin China General Manufacturing PMI report with surprising results. The index is an important economic metric used to gauge the health of Chinese economy and posted at 50.8 indicating positive sentiment. According to the report, production and total new work both increased at quicker rates and employment expanded for the first time in over five years.

Apple’s next earnings call is scheduled for April 30. Apple’s net sales in China are likely to show less negative dynamic. We don’t expect significant improvement straight away though. Macro trends will play out on a longer time scale and the positive news coming from China may still be noise rather than a signal.